Gaztransport&Tecnigaz Adr

Welcome to the GTT third quarter 2021 activity update. At this time, more participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star and 1 on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Philippe Bertheau, the GTT CEO. Please go ahead. Philippe Bertheau Hello.

Good evening, everybody. I'm very pleased to be with you for our third quarter 2021 activity update. I am with Virginie Aubagnac, our group CFO, for presenting you this update. Well, first of all, let's start with the third quarter key highlights. On the first nine months of 2021, we achieved revenues of 240 million, which is 21% less compared to what we achieved at the same time in 2020. and 20% more than what we achieved at the same time in 2019. On our core business, we had a strong order in tech with 26 LNG carriers in the third quarter. Since the beginning of the year, we obtained 40 LNG carriers, two VLECs, six onshore storage carriers, with delivery dates spreading mainly over the 2023-2025 period. LNG as a fuel is picking up. In the third quarter, we obtained tanks for eight container ships, and since the beginning of the year, it's 25 container ships. In innovation, we've been very active with two new authorization in principles, ballast water-free for bunkership in July, and energy-fueled AfraMax vessel developed with Delta Marine in September. For smart shipping, we introduced a new solution, the launch of EnergyOptim to help energy operators to optimize their environmental performance. You know that We are, that's our basic purpose, to offer optimized systems which are generating the best environmental performances. We co-opted two directors, Florence Fouquet, representing Angie, who is replacing Cécile Prévieux for the reminder of her term of office. And we co-opted also Catherine Ronf, as an independent director replacing Michel Azalbert. Well, as I was saying, we have a quite strong order book as end of September 2021. On energy cars, we obtained 40 orders since the beginning of the year. We delivered 44 ships at the same time. And if we look at the energy as a fuel, we obtained 25 orders, and we delivered seven ships. So I could go into more details, but what we can say, it's a very dynamic order book with deliveries, a lot of deliveries, and a lot of new orders. It's quite lively. Energy and supply demand, well, quite obviously, new capacities are required. We can see that on this chart with the horizon of 2040. It's the sense of the decision taken by Qatar, but we can see that also through the numerous contracts passed by off-takers for contracts for SPA for American projects not yet decided. And the more it goes, the more it becomes likely that these projects are going to be decided, adding additional capacities and adding additional need for energy cars. Keeping on looking at the dynamics of the market, we can look at the Asia, Northeast Asia, with China leading the energy demand growth in 2021. With for this year, as it was the case for the past years, double-digit percentage growth, 19%. It's very impressive. China has overtaken Japan as the largest importer of energy in the world. We have also quite impressive growth in Korea with 9% growth. and in India with 4%. So a very active market in Asia. Talking about prices, we can see that current spot energy prices are calling for more energy production facilities. Prices are around $40 the MMBTU. You can see the volatility of these prices, and that just underlines the tightness of the energy offer, and in our opinion, that could lead to new decisions, but also to a certain switch to long-term contracts. When we look at energy carriers and at the spot market there, the spot charter rates, we see that they are also soaring, underlying the lack of energy carriers. We can see that for very short-term spot charter rates, which are very high with discrepancies according to the region, but we can see that also for the one-year charter rates, which are quite high, and with also, quite interestingly, a very important spread between the most modern vessels with XDF or DFD engine or MEGI engine and the old steam turbine vessels, which is underlining the requirement for more environmentally friendly ships. And I think that is a very important learning because it shows that the market really prefers the most modern shapes with very high environmental performances. And that's what we offer once more. We are really committed to that. Thanks to our latest technology, we can very significantly reduce the environmental footprint of LNG care. Well, looking at the long-term contract for energy, we can see that in spite of the current context for gas, they remain quite affordable. If you take a long-term perspective, you see that energy is significantly more affordable than what it was 10 years ago. That is largely due to the competition between the decryption projects. You know that very often they are indexed on the oil prices. So you can see the influence of the oil prices on these curves. But also the index, the percentage according to which they are indexed is decreasing due to the competition. So the more it goes, the more LNG is becoming affordable and attractive for uptakers. In 2021, LNG as a fuel container ship business has picked up quite strongly. Business for container ship has been very significant. for the last nine months, and very significantly, about 20% of them have selected LNG as a fuel. You saw the importance of the orders we obtained, and so we are on the verge of achieving a long-term goal, which is GTT membrane technology becoming a solution of preference. for energy as a fuel on ocean-gearing vessels. We announced a couple of days ago a new significant contract for Elogen, which has been selected by Soenji to equip a storage project storing hydrogen. There, Elogen will supply a 1 megawatt PEM electrolyzer, which will allow a production of 400 kilos of green hydrogen per day. So it's another significant contract obtained by Elogen after the contract we obtained earlier this year with Aon. We obtained also some other contracts which are less important, and we did not communicate but we are quite pleased by the flow of orders we are receiving since the beginning of this year, and also by the quality of all our customers, which translates, which produces, in fact, a high degree of confidence in the Elogen offering in terms of performance, in terms of industrial credibility, and in terms of capacity to support the product and the customer. Now, I will hand over to Virginie for continuing on the nine-month results.

Thank you, Philippe. Good evening, everyone. First, I'd like to remind you that 2021 figures compared with 2020 which was a peak year benefiting from a very strong order in tech in 2018 and 2019. Consolidated revenue for the first nine months are in line with our expectations, amounting to 240 million euros, a decrease of 21% compared to 2020, but an increase of 20% compared to the same period in 2019. 224 million euros came from new-build royalties, mainly LNGCs, but also from other membrane applications on the VLECs, FSU, SSRU, onshore storage, TBS, and all those products. Revenue of LNG as a fuel are down 14% over the first nine months, but we expect an increase in revenue in the future thanks to those 25 orders we get since the beginning of the year. Elogen's revenue amount to 3.3 million with an order index of 6.2 million euro over the period and we confirmed the guidance of 6 million euro sales by the end of the year. On the service side, all revenue are growing, maintenance and assistance, supplier certification, pre-engineering studies, and training activities, showing the attractiveness of our offers on the service side. I now leave the floor to Philippe to conclude this presentation.

Thank you very much, Bianchini. So as far as our guidance, We are confirming that our revenues should be in the range of 285 to 350 million euros. We are confirming that our EBITDA should be in the range of 150 to 170 million euros. And we are confirming that we will pay a dividend of at least 80% for the 2021 exercise. So now we are going to be very pleased, Virginie and I, to answer to your questions.

Thank you. As a reminder, you will need to press the star and 1 on your telephone to ask a question. To answer your question, please press the hash key. Once again, it is star and 1 on your telephone to ask a question. We will now take our first question from the line of Kelly and Roger . Please go ahead and let us open.

Yes, good evening. Thanks for taking my question. I would have two actually. The first one would be on the, let's say, long-term trend for the LNG market because we have some, let's say, positive comments recently from some like Baker Hughes or Technip Energy that in a way pushed up their forecast. And seeing your slideshow that basically the Wood Mackenzie forecasts at 2.3 are basically the same one that they had previously. You still have a gap of something like 300 million tons. So I was wondering if you can share with us your view. Do you consider, let's say, the recent stakeholders that have given bullish comments too optimistic, or would you consider would McKinsey maybe too prudent for the moment and that we should expect them to revise their forecast? And the second question, I would try it because I know that you will not give any formal guidance for 2022, et cetera, but over the short term, would you consider, let's say, using your balance sheet and your strong cash position to in a way maintain the dividend for the shareholders as with, let's say, the official policy at least 80% mathematically with the decline in earnings, it would imply a decline in the dividend. So would you consider using the cash to keep it stable exceptionally, for example, this year?

Thanks a lot. Well, thank you very much, Kevin. Good evening. Well, we on LNG, we saw the comments from Baker Hughes. The first of all is that we are trying to be consistent in the sources of information we are using. And we are using Wood Mackenzie. They are sticking to their approach. Well, I would not betray a great secret in saying that the atmosphere is quite positive in the energy business. But still, we had a very important decision which has been taken this year. Let's see what we said in this presentation today. that very significant contracts have been passed to energy plant developers. So the context is very positive. But let's be cautious. Still, since Qatar has decided the North field extension, no decision has been taken. We, probably decisions are going to be taken in 2022. what we are relying on is the same source of information than the one we provided to you in the past. So that's for the first question. For the second one, on the dividend and our balance sheet structure, What I could say is that that is a decision from the board of directors. I do understand that it's quite interesting to know, but we cannot say anything about that before the board of directors decides something. And it is not the case for the time being.

Okay, thanks. And as a very quick follow-up, There is, in a way, one slide missing in your presentation. At the end of page one, you were saying that basically 92 vessels were needed for the project that have been sanctioned. Do you have this updated number at the end of Q3, please?

No, we don't have it. We don't have it. I just would like to underline several things. I would say that there are major figures on this chart for the Qatar project, for the Golden Pass project, and for the Mozambique project. And the orders for these three projects have not yet been passed. So the flow of orders we received are beside that. which in a certain way is confirming something that we were touching a little bit in our presentation, that the market is very much needing, appreciating, looking at very modern shapes in order to reduce the CO2 emissions. And this replacement market, the more it goes, the more it becomes something real.

Okay, thanks for that. Have a nice evening.

Thank you, Kevin.

We will now take our next question from the line of Jean-Luc Romain at CIC Market Solutions. Please go ahead, Eleni Sabin.

Good evening. two questions actually one about your guidance at 285 to 315 it's still quite large as we are at the end of October and I was wondering what could tp towards the lower end or towards the higher end of the guidance the first question the second question is about hydrogen there was a very interesting show more evolution going on yesterday and today in Paris. And Elogen presented their views. When you look at the brochure, there's a kind of minimum 400 megawatts objective for sales of electrolysis capacity by 2030. What would it represent in terms of turnover was 100 megawatt of annual sales.

Okay, thank you very much Jean-Luc for this question. Yes, for the guidance we are confirming this range and we are going to be there. For hydrogen, we indicated that, and we did not give figures on the turnover. You know that it's a very dynamic market, and you know us. I mean, we are cautious, reasonable, prudent people, and we cannot change our sets. So we will stick to that. Sorry for that, Jean-Luc.

No worries. Thank you.

Thank you.

As a reminder, please press the star N1 on your telephone to ask a question. There are no further questions coming through on the phone lines. Actually, we've just received a few more questions. We will now take our next question from the . Please go ahead. Your line is open.

Yes, good evening. Just a question regarding the LNG as a fuel. So we see a strong rebound of new orders at 25 this year. Do you consider that there is a structural and long-term trend? So do you expect more orders in the coming month or more dynamic orders for this business? It was not the case previously. This is a great change for this year. So do you expect more dynamic orders of business for general as a field in the coming month?

Well, the fact of the matter is that energy as a fuel now is a reality. It has taken off, finally, and we are taking our share of the market. For us, you know us, and we are saying that since 2013, we consider that energy is the way and the only way in the next couple of decades or the next three decades to clean up the emissions of the shipping world. And 2021 has been the year of takeoff of this activity. Still, we are so convinced of that as we are working hard on that. We still feel that the 20% dual fuel ship on the container business is fairly small. So I would say that we are quite confident that it will continue, the adoption of LNG as a fuel in the months to come. So yes, we are quite positive on this business. And you know, it's a business where there is competition. There are other technical solutions which are experienced, and we are quite pleased by the fact that some owners who are operating our systems are coming back. It's what I call the proof of the pudding. The cake should be good if you take a second slice. And that's what homeowners are doing. And finally, the shipowner world, it's a big world, but also it's a world where people are sharing experiences. So we hope they will share the lessons they learned from the early experiences. with us and with LNG.

Okay, thank you very much.

We will now take our next question from the line of Jean-Luc Romain at CIC Market Solutions. Please go ahead and it's open.

Another question. It's in the services that were announced on top of your recent wins in LNG as a fuel. You have some services to optimize the working of those vessels. You will supply the technology. What Could it represent something important in terms of your turnover, the growth in your services turnover in the next few years?

Well, services, you know that it's a fairly small business compared to the rest of our businesses. And it's a business which is slightly growing. So the more it goes and the more we deal with new owners who are discovering energy, who would like to rely on an existing expertise, the more this business will go. For us, in fact, I've always said that services, even though they are small, they are strategic because they are helping people to begin with energy services. and to rely on energy, to rely on our technology. The motto there is make energy easy. So that's what we do with our set of services. So beyond the figures, which are maybe not yet impressive, I do admit, they are very much facilitating the adoption of our technologies by newcomers. Thank you.

We will now take our next question from the line of John Richard at Barenburg. Please go ahead and let us open.

Yes, good evening, everyone. Thanks for taking my questions. I have two, please. The first one on your core business energy carriers. Did the shipyards report any sort of disruptions to their production schedule over the last few weeks, either because of workforce-related issues or because of disruptions to their own supply chains. And the second question would be on LNG as a fuel. So we are seeing this nice uptick in oil intake, especially from the larger deep ocean vessels. So the smaller vessels, let's say six 5,000 cubic meters and lower. Are you trying to, because you do have some competitors here, but I was just wondering if you do consider your technology here to be ready or if you're trying to bring, you know, to do some adjustments either to the cost of the solution, bring it down just to improve its competitiveness.

Thank you. Well, on the description of operations from shipyards, We did not see anything. I know that they are suffering from steel price hikes, but it's a matter of price, not a matter of availability of steel plates. On energy as a fuel, we were targeting large tanks and You saw that we provided tanks of a smaller dimension, especially on the cruise ship, which is now in operation with Ponant. And we expect there as well that the experience is going to demonstrate to other owners that it can work and it can bring a lot of benefits. So I would say that among all our efforts in marketing, we are going to try to go down, if I may say, in sizes of tanks and to try to be convincing even for a smaller tank, not in degrading anything. It's not so much our style, but ensuring that the benefits in terms of total cost of ownership are great even though the tank is smaller. Okay, thank you.

If there are currently no further questions, I would now like to hand the call back to the CEO, Philippe Berthodieu. Please go ahead.

Well, I would like to thank you all for attending this conference. It's always a pleasure to discuss with you. So thank you very much. and I hope we are going to have the opportunity to continue to exchange very soon with all of you. Thank you.